Let the economy set the minimum wage

January 24, 2013

Low-pay workers have waited long enough for the minimum wage to go up - nine years - and $7.25 an hour just isn't reasonable given today's much higher costs of rent, food, gas, etc. So it's good that Gov. Andrew Cuomo and state legislative leaders are trying to increase it.

Granted, many upstate businesses are barely hanging on, too. They have a legitimate worry that, in a still-strained economy, the jolt of a $1.50-per-hour minimum wage hike (the amount proposed by the governor) would be unaffordable for many of them unless they cut their staffs - thereby increasing unemployment, which no one wants. But the minimum wage has been increased many times in the past without crashing the economy. I can't see how this need outweighs that of the poorest workers.

There is, however, a workable compromise. Instead of leaving this decision up to politicians every few years, let the economy set the minimum wage.

In other words, link the minimum wage to inflation and have it change annually with the Consumer Price Index.

I feel strongly that this is the fairest and most sustainable way to go, but many business advocates dislike it. One reason is that the bills that have it, like the current Assembly minimum wage hike bill, also include a one-time minimum wage boost. That's hard for a lot of business folks to swallow.

Well, how about reducing or eliminating the initial bump and keep the annual CPI increase, starting next year?

It's not like this would mean steep annual jumps. Look at the numbers; here are the CPI increases of the last 10 years:

2012: 2.1%

2011: 3.2%

2010: 1.6%

2009: -0.4%

2008: 3.8%

2007: 2.8%

2006: 3.2%

2005: 3.4%

2004: 2.7%

(FYI: The annual CPI change hasn't hit 4 percent since 1991. It last hit double digits for three years from 1979-81 and has only topped 5 percent twice since then. The extremes in the last century are 18 percent in 1918 and minus 10.5 percent in 1921.)

At that rate, the minimum wage might take a long time to reach the now-proposed $8.75. Here's how it would increase over the next 10 years if hypothetically, the CPI went up exactly 3 percent a year and there was no initial bump - if the indexing started from the current minimum wage:

2014: $7.47

2015: $7.69

2016: $7.92

2017: $8.16

2018: $8.40

2019: $8.65

2020: $8.91

2021: $9.18

2022: $9.46

2023: $9.74

Here's how it would increase if the CPI went up 2 percent a year:

2014: $7.40

2015: $7.55

2016: $7.70

2017: $7.85

2018: $8.01

2019: $8.17

2020: $8.33

2021: $8.50

2022: $8.67

2023: $8.84

Now come on, that's not too much.

If your argument is that you don't want the government sticking its hands into businesses' pockets to give more money to workers, that probably means you're against a minimum wage at all. OK, but there is a general agreement that our society should have a minimum wage and that it should go up occasionally, since the cost of living does. Otherwise, employers can too easily take advantage of poverty and even prey upon needy people with few options.

Most businesses must pay more than minimum because no one would take their jobs otherwise, but local job markets don't always have the level of competition needed to drive up wages on their own. All the more reason to have a minimum: because it won't affect those who pay fair market value for their labor. Many employers, unfortunately, would pay the minimum even if it was $2 an hour, just because they can. This is for them.

Minimum wage increases are too far apart because each one requires a political battle. During the time it takes for the ideological warfare and lobbying to play out, the poorest workers steadily get poorer. That means that when the economic tide rises, it doesn't lift the boats of the low-wage earners. It doesn't have to be that way. It can and should lift all. Those who claim to trust in free markets, take note.